Largest banks lag in online usage

The rate at which customers use online banking is accelerating, says a new report from Credit Suisse First Boston, but it's not the largest banks who are leading the charge.

The rate at which customers use online banking is accelerating, says a new report from Credit Suisse First Boston, but it's not the largest banks who are leading the charge.

Two regional banks -- Wachovia Corporation based in Winston-Salem, and Cincinnati-based Provident Financial Group -- have penetration rates of 21% and 17%, respectively.

Today, 80% of the top 100 banks in the US offer online banking, says report author James Marks. In addition, several of the banks that do not offer online banking yet say they will do so this year, he added.

Of the banks that do offer online banking, the average use rate is 10%. And of customers using online banking, only 22% sign up for electronic bill payment.

Some banks are also not marketing their online products adequately to customers, the report said.

The top-ranking banks, by comparison, use low-cost, in-branch marketing such as displays, brochures and incentives for employees to enroll customers.

Wachovia, for example, invites customers to fill out online banking applications while waiting for a teller to finish helping them.

One problem with online banking, according to Marks, is that it costs the banks more money than it brings in and, as a result, they are not likely to promote it -- in addition to charging money for its use.

"Eventually, they're going to have to give it away for free," said Linda Alt, an analyst with the Stamford, Gartner Group.

In addition, according to Lawrence Baxter, Wachovia's head of e-business, customers may not always ask for these services.

"Our whole Internet thrust has always been somewhat ahead of customer demand," he said.

Most recently, Wachovia became one of a handful of US banks to announce that it will be make wireless banking available to its customers.

Another service that may soon start driving more customers to online banking is online bill presentment, said Alt, which is not available from many billers.

Today, a customer receives a bill in the mail from say, a utility company, goes to his bank's Web site, selects the utility company from a list of payees, and types in a dollar amount.

With online bill presentment, the customer won't have to go to the mailbox -- an electronic version of the bill will be available online for immediate payment.

"That's something that's going to encourage more Internet banking," Alt said.

Finally, word of mouth is a potent force: As more customers sign up, they tell more friends and relatives.

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